André Kroneberg Gard AS P&I Basic understanding of risks covered, risk assessment and the underwriting process André Kroneberg Gard AS The Nordic Association of Marine Insurers

Agenda The P&I risks The Risk assessment The Underwriting process Additional liability covers The Nordic Association of Marine Insurers

Agenda The P&I risks The Risk assessment The Underwriting process Additional liability covers The Nordic Association of Marine Insurers

The risk picture The Nordic Association of Marine Insurers Assets Liabilities Income The Nordic Association of Marine Insurers

Discussion What P&I risks (third party liabilities) are relevant for: A Ship owner? A Charterer? The Nordic Association of Marine Insurers

History of P&I 1688: Lloyds insurance market for ship/cargo insurance Early 1800: Mutual hull clubs Pre 1836: Limited need for sophisticated liability insurance Post 1836: Gradually evolving liabilities – collision/persons 1855: Britannia mutual P&I Club 2014: 13 mutual P&I Clubs – 90% of world market, International Group The Nordic Association of Marine Insurers

Mutual P&I insurance means: The Members are the owners of the P&I Club The Members of the Club are both insurers and insureds There are no third party owners to earn a profit The Members are liable to pay such additional premium as is necessary to balance the books or build reserves Members who leave the Club are still liable to pay such additional premium unless they pay a ’release call’ The Nordic Association of Marine Insurers

The standard P&I Cover Crew and passenger Cargo Collision/Damage to fixed and floating objects Pollution Wreck removal

The standard P&I Cover High limit of cover: Standard deductibles: Oil pollution: USD 1 BN per event Passengers and crew: USD 3 BN per event Additional limit available through Member’s legal obligation to pay overspill call Standard deductibles: Crew: USD 5,000.- per event Cargo: USD 17,000.- per event Pollution: USD 17,000.- per event Collision: USD 17,000.- per event Wreck removal: USD 5,000.- per event The Nordic Association of Marine Insurers

Rule 27 – Liabilities in respect of crew Liabilities arising out of injury to, or illness or death of a member of the Crew Crew agreement or other contract of service or employment? The Nordic Association of Marine Insurers

Rule 34 – Cargo liability Liabilities relating to cargo intended to be or being or having been carried on the Ship Legal liability for loss, shortage, damage in respect of cargo carried Terms no less favourable to the Member than those laid down in the Hague or Hague-Visby Rules (mandatory terms are covered) The Nordic Association of Marine Insurers

Rule 36 – Collision with other ships The Association shall cover liability to pay damages incurred as a result of a collision with another ship, if and to the extent that such liability is not covered under the Hull Policies on the Ship RDC – 1/4, 4/4 The Nordic Association of Marine Insurers

Rule 37 – Damage to fixed an floating objects The Association shall cover liability for loss of or damage to any fixed or floating object by reason of contact between the Ship and such object, when not covered under the Hull Policies The Nordic Association of Marine Insurers

Rule 38 – Pollution The Association shall cover liabilities, costs and expenses (excluding fines) arising in consequence of the discharge or escape from the Ship of oil or any other substance or the threat of such discharge or escape The Nordic Association of Marine Insurers

Rule 40 – Liability for obstruction and wreck removal The Association shall cover costs and expenses relating to the raising, removal, destruction, lighting and marking of the Ship or of the wreck of the Ship or parts thereof or of its cargo lost as a result of a casualty, when such raising, removal, destruction, lighting and marking is compulsory by law The Nordic Association of Marine Insurers

Rule 51 – General limitation of liability Where the Member or a Co-assured is entitled to limit his liability pursuant to any rule of law, the maximum recovery under a P&I entry is the amount to which the Member or the Co-assured may limit his liability The Nordic Association of Marine Insurers

Rule 55 – Terms of contract The Association shall not cover under a P&I entry liabilities, losses, costs or expenses which would not have arisen but for the terms of a contract or indemnity entered into by the Member, or by some other person acting on his behalf, unless the terms have previously been approved by the Association The Nordic Association of Marine Insurers

Discussion Under what type of contracts with third parties may a ship owner or charterer be exposed to contractual liabilities in excess of background law/applicable conventions? Liner trade (containers, roro) Spot trading (wet, dry bulk) Offshore trade (supply and anchor handling) In general What types of contractual liabilities can you think of under the various contracts? Cargo, crew, etc.? The Nordic Association of Marine Insurers

Agenda The P&I risks The Risk assessment The Underwriting process Additional liability covers The Nordic Association of Marine Insurers

Risk assessment Fleet Number, age, type, class, flag Crew Number and nationality, contracts Cargo Type and value Trade Port call frequency, US exposure, deep sea/short sea Owners Finance, history, claims record Management Technical and crew Insurance requirements Terms and conditions – exclusions, deductibles, collision? The Nordic Association of Marine Insurers

Gross incurred claims – P&I Mutual 2008 - 2012

Discussion Make a P&I risk assessment of following: Cruise vessel – 2,000 passengers, Miami based, Caribbean trade Container vessel – 10,000 TEU capacity, worldwide trade, deep sea Offshore anchor handling vessel – North Sea trade Identify the most important risk factors? Give a rough estimate of the relative difference in P&I premium? Make assumptions as necessary The Nordic Association of Marine Insurers

P&I premium – the mutual formula Budget Income Budget Outgoings Received from Reinsurers Reinsurance Premiums Investment Income Adm. expenses Deferred Calls Claims Advance Calls

P&I premium – the mutual formula Actual Income Actual Outgoings Budget Income Budget Outgoings Received from Reinsurers Reinsurance Premiums Received from Reinsurers Reinsurance Premiums Investment Income Investment Income Adm. expenses Suppl. Calls Adm. expenses Deferred Calls Deferred Calls Claims Claims Advance Calls Advance Calls

The P&I premium call system (Gard) 100% Deferred Call – debited during following year 25% 80% Advance Call – debited during Policy Year The Nordic Association of Marine Insurers

Release calls Release calls (Gard, Oct. 2012) For the 2010 policy year: nil For the 2011 policy year: 10 per cent For the 2012 policy year: 50 per cent For the 2013 policy year: 50 per cent Upon payment of such Release Calls, the Member shall be released from all liabilities for further Deferred Calls and Supplementary Calls. The Nordic Association of Marine Insurers

Overspill calls Overspill Call a call levied by the Association for the purpose of providing funds to pay part of an Overspill Claim. Overspill Claim that part (if any) of a claim (other than a claim arising in respect of oil pollution) incurred by the Association or by any other party to the Pooling Agreement under the terms of entry of a ship which exceeds or may exceed the Group Reinsurance Limit. Levying of Overspill Calls The Association shall not levy on any Member in respect of the entry of any ship an Overspill Call or Calls in respect of any one Overspill Claim exceeding in the aggregate two and a half per cent (2.5%) of the Convention Limit* of that ship. *International Convention on Limitation of Liability for Maritime Claims 1976 (Art. 6 paragraph 1 (b)) The Nordic Association of Marine Insurers

IG Reinsurance program 2013 High limits of cover available through a sophisticated re-insurance Source: International Group of P&I Clubs (www.igpandi.org)

Agenda The P&I risks The Risk assessment The Underwriting process Additional liability covers The Nordic Association of Marine Insurers

The Underwriting process – 4 steps Client Management Pre-entry Cover Management Renewal Post-entry Main activities: - Marketing - Risk evaluation - Quotations - Declines - IGA? Main activities : - Cover questions - Quotations - Claims - Contract reviews - Documentation updates Main activities: - Premium policy - Budgets - Quotations - Non-renewals Main activities: - Notice of cancellation - Inform mortgagee - Premium adjustments The Nordic Association of Marine Insurers

The application for a new entry Name of Assureds/co-assureds incl. capacity The name of the ship(s), year built, IMO no., port of registry, flag, Class, gross tonnage Mortgagees? Number and nationalities of the officers and crew, including information on the terms of employment Whether cover is required for collision with other ships and damage to fixed and floating objects Passenger capacity Trading areas and planned cargoes Date of entry Above basis for production of documents such as Certificate of Entry, debit notes, certificates, Letter of Undertakings etc. The Nordic Association of Marine Insurers

P&I Renewals general increase + adjustment for loss record The Nordic Association of Marine Insurers

The International Group of P&I Clubs 13 Member Clubs P&I cover for approximately 90% of the world’s ocean-going tonnage Re-insurance function Claim sharing agreement Representative function Promote shipowner’s interests Exchange of information Sharing information on matters of common concern

The International Group Agreement - Change of Club Shipowner authorises Holding Club to release terms, conditions and net loss record to New Club New Club reviews and accept/decline entry on same terms as proposed by Holding Club New Club becomes a Holding Club only after a full Club year of entry (20/02-20/02) The Nordic Association of Marine Insurers

The International Group Agreement - Competition Adding a new vessel to an existing fleet “Free business” between Holding Clubs only New Clubs must ask Holding Clubs for terms A new fleet (commercial management) “Free business” for all Clubs First entry with a Club – “Holding Club” status The Nordic Association of Marine Insurers

Agenda The P&I risks The Risk assessment The Underwriting process Additional liability covers The Nordic Association of Marine Insurers

Four main, stand-alone P&I covers (Gard) Owner’s P&I As per Rules for Shipowners MOU P&I As per Rules for MOUs Crew Manager’s P&I As per Crew and personnel related Rules Comprehensive charterers P&I As per Rules for shipowners Extension of cover note for DTH etc.

P&I Cover for Mobile Offshore Units History back to the early 1970s Ship-owner Members started with drilling rigs Non-poolable risk - need for special insurance Floating Production & Storage Units, Drilling Rigs and Accommodation Units The Nordic Association of Marine Insurers

Comprehensive Charterers Cover Risks covered include: P&I risks Damage to Hull GA contribution War risks Maximum limit: USD 750 million

Additional, bolt-on liability insurance Standard P&I Crew/ personnel Cargo Specialist operations Contracts Passenger

Gard’s Comprehensive Carriers Cover Cargo (legal) liability under a TT BoL Cargo and third party (legal) liability Cargo and third party (legal and contractual) liability, regardless of BoL Cargo liability – geographical/contractual deviation Geographical deviations (e.g. bunkering on non-customary ports) Contractual deviations (e.g. del of port other than stated in BoL) Delivery of cargo without BoL or similar document (subject to LOI) Standard P&I Cover Comprehensive Carriers Cover (CCC) The Nordic Association of Marine Insurers

Gard’s Extended Crew Cover Liabilities in respect of crew whilst on leave (e.g. compensations for death, disability, medical expenses) Liabilities in respect of other persons in-tort or under contract (e.g. site teams, maintenance teams) Liabilities to third parties due to the acts and omissions of crew and other personnel – in-tort or under contract (e.g. site team at yard with liability exposure under a yard contract) Liabilities to close relatives to the crew (spouse and children)

Gard’s CGL and Offshore Contractual Liability - Cover for offshore and specialist vessels Liabilities and risks not covered by standard P&I: Specialist operations Contractual liabilities Towage Operation of subsea equipment Divers

“A day in the life of an underwriter” - request for insurance from a new ship owner Good people all, We are a newly started Ship owning company who will take delivery of 4 newly built car carriers, each with a capacity of 6100 cars, by the end of Q2 2015. As a result, we are in urgent need of taking out proper insurance for our activities carried out as ship owners.   Please see below list of liability interests we wish to insure which we kindly ask for your response to: Liability for cargo (while on board vessel) – (legal and contractual) Liability for crew – (legal and contractual) Liability for pollution Liability (to third parties) for collision and striking Also, to what extent could you include cover for the following; Liability for cargo when not onboard vessel e.g. if we agree to take on responsibility to transport cargo “door-to-door” incl. transport by train and/or truck and warehousing Liability for crew when not onboard ship but away on training course and/or excursion and/or underway to get to and from vessel to home Deviation from contractual route for bunkering etc. Kind regards,  Cpt. Schettino CEO Schettino’s Shipowning Company Questions: To what extent would the P&I cover comply? Any need for additional liability insurance? What further information would you request for rating purposes? The Nordic Association of Marine Insurers